We're getting confirmation of this theme in the latest round of
quarterly earnings reports, where businesses that cater to
discretionary consumer spending are blowing away expectations.

In a recent slide deck to clients, Morgan Stanley's chief US
equity strategist Adam Parker shared a chart showing the
aggregate differences between actual earnings and estimated
earnings across various sectors. So far, he points out, those in
the consumer discretionary sector are leading the way in
surprising the pros.

"[E]arnings have exceeded expectations by 10.7%, the most
of any sector so far this earnings season," he writes.

By comparison, the earnings of the S&P 500 as a whole
exceeded expectations by only about 5.2%.

"We are generally optimistic on the consumer," he continued.
"More people are working, they are working more hours per week,
and they are making more money per hour than they were a year
ago. Their obligations are down due to low interest rates and a
much lower gasoline price. There are limited signs of stress, as
credit card and mortgage delinquencies continue to decline."

Morgan
Stanley

In a research note published on Friday, FactSet's senior earnings
analyst John Butters highlighted a few companies that reported
actual results above estimates by the widest margins. First on
the list, Amazon with
+$0.17 per share compared with -$0.13, followed by General
Motors, Lennar, and Darden Restaurants.

This shouldn't come as a surprise to those who keep their eyes
glued to the US economic data, as the American consumer has
frequently been cited as a source of strength over the past few
months. In fact, the bulk of the recent months'
personal spending data has been robust, even amid what
appears to be a
recession in manufacturing.

Notably, although some were concerned that slumpy Walmart
data — and its CEO's bleak
assessment of the US consumer — could suggest that
the consumer is starting to sputter, it's worth pointing out that
Walmart may no longer accurately reflect US consumer's tastes.
After all, as consumers continue to gravitate towards
online shopping, it's reasonable to suggest that e-retailer
Amazon has dethroned Walmart as the
primary indicator of American consumer sentiment.

And, as FactSet's Butters mentioned in his aforementioned note,
Amazon was number one on the list of consumer discretionary
companies that reported the largest upside aggregate differences
between actual earnings and estimated earnings.

Perhaps the American consumer will continue on strong, smashing
expectations. At least in the near future.